Shiba Inu vs. Dogecoin: Which pupcoin's more bite than bark? 

Here's why neither of these puppies may deserve a forever home in your portfolio.

| More on:
two cute shiba inu puppies are in a basket with one playfulling biting at the side of the other's face.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) were two of the best performing altcoins in 2021. But aside from having canine-derived names, the two coins are very different – and investors hoping to gain from them need to look at the value they offer beyond their price tags.

Dogecoin: Like Bitcoin, but different

Like Bitcoin (CRYPTO: BTC), DOGE is a decentralized currency, meaning that no central banking authority controls it. A network of miners earn tokens for "solving" blocks, racing to be the first to complete the tricky mathematical calculations that ensure the block's accuracy. After the other computers on the network verify the solution, the block is added to the blockchain – a process known as proof of work. 

However, Bitcoin and Dogecoin have several differences, starting with scarcity. Simply put, there is an infinite supply of Dogecoin, making it an inflationary currency; the more Dogecoins get minted, the less each existing coin is worth. By contrast, the total supply of Bitcoin is capped at 21 million tokens, of which approximately 19 million have already been mined. Bitcoin advocates argue that this scarcity will make Bitcoin a store of value. 

The second difference lies in the decentralization that gives crypto its security. Bitcoin has over 14,000 viewable nodes distributed across 97 countries. This makes it virtually impossible for unsavory actors to seize more than half the network and get rich planting false trades in the blockchain. Dogecoin has less than 1,400 nodes as of this writing; according to figures from April 2021, just 98 people held nearly two-thirds of the coins' total supply. This makes DOGE far more susceptible to wild price fluctuations. 

Crypto enthusiasts will say that these criticisms miss the point. The Dogecoin community has plans to make Dogecoin a widely used peer-to-peer payment system. That's a more straightforward but more challenging way to garner mass adoption. Over 2,000 companies, including Lowe's and Ulta Beauty, now accept Dogecoin as payment. This doesn't mean you'll be able to use Dogecoin to buy your groceries anytime soon, but it's enough of an incentive to keep the retail traders that make up the vast majority of the Dogecoin community interested. 

And the Dogecoin Foundation is collaborating with Ethereum co-founder Vitalik Buterin to create a unique staking mechanism as Dogecoin moves to a proof-of-stake (PoS) protocol. This approach, which uses far less energy and computing power to verify transactions, would remove some of the inflationary concerns around Dogecoin, while still allowing it to be a viable medium of exchange. 

Shiba Inu wants it all

Shiba Inu, by contrast, is already based on the Ethereum network. Ethereum uses blockchain technology to enable smart contracts and decentralized applications (dApps) that are not subject to downtime, fraud, control, or interference from a third party. 

SHIB has only been in existence for a year, but its passionate community, the SHIB army, is helping drive adoption of the altcoin. That enthusiasm undoubtedly benefited many early adopters of Shiba Inu. However, it raises a fair question: How far can a passionate community take an altcoin? 

Thus far, Shiba Inu doesn't actually do much in the real world, particularly for a coin that has a $13 billion market cap as of this writing. However, the SHIB network is working on numerous projects such as ShibaSwap, which lets buyers trade SHIB for other cryptocurrencies.

And because the coin is based on the Ethereum network, Shiba Inu is also making inroads in the realm of DeFi projects, as well as the growing non-fungible token (NFT) market. The coin is also likely to benefit from Shiberse, which is a play on the nascent metaverse and the expected launch of level 2 blockchain Shibarium, an upgrade to the existing SHIB blockchain that will, in theory, allow the network to process transactions faster.

Atop all this, Shiba Inu is also trying to be a way to buy things, similar to Dogecoin. In fact, many of the same companies that accept DOGE as payment also take SHIB. 

As Shiba Inu continued to reach record highs in 2021, the SHIB army used these examples and more as "proof" of the coin's future utility. These projects could indeed promote Shiba Inu to a broader audience. However, the recent sell-off in Shiba Inu suggests that the currency will have to match those high expectations with concrete action. 

Will either coin make the cut?

If the "crypto winter" continues, neither coin may survive. Neither has enough utility compared to Bitcoin and/or Ethereum. As a crypto skeptic, I won't be investing in either of the pupcoins. And you should be advised that any investment in cryptocurrency is likely to remain volatile and is only for risk-tolerant investors. 

But if these coins do avoid a crash, Shiba Inu's optionality may give it at least slightly better odds of long-term survival. Just like a company that has multiple avenues for generating revenue, SHIB has many more opportunities to prove useful in the real world, which will, in theory, make the coin more valuable. DOGE has had a nice run for a coin that literally started as a joke, but it still looks like a one-trick pony. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Fool contributor Chris Markoch holds no financial position in any investments mentioned above. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Ulta Beauty, Bitcoin and Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Lowe's. The Motley Fool Australia owns and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 

More on International Stock News

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Up nearly 80% this year, does Nvidia stock have room for more?

Nvidia's stock added a lot of its gains the day after Q4 earnings.

Read more »

Piggy bank on an electric charger.
International Stock News

If you'd invested $1,000 in Tesla stock 5 years ago, here's how much you'd have today

Tesla bears may not have noticed it, but Tesla profits are forecast to 3x over the next five years.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
International Stock News

Bull vs. bear: Can the S&P 500 keep rising in 2024?

We review the bull and bear case for the S&P 500 this year.

Read more »

woman with coffee on phone with Tesla
International Stock News

Why Tesla stock put pedal to metal today

Tesla's robotaxi is coming in August.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
International Stock News

If you invested $10,000 in Nvidia stock the day ChatGPT came out, this is how much you'd have today

Buying Nvidia when the disruptive AI chatbot launched would have been a smart move.

Read more »

A Tesla car driving along a road at sunset
International Stock News

Why Tesla stock was climbing today

Investors were encouraged by news of a price hike on the Model Y.

Read more »

Plate with coloured wedges being parcelled out like a slice of pie representing a share split
International Stock News

Stock-split watch: Is Nvidia next?

Nvidia last split its stock when it traded for a pre-split $744 in 2021.

Read more »

A woman in jeans and a casual jumper leans on her car and looks seriously at her mobile phone while her vehicle is charged at an electic vehicle recharging station.
International Stock News

1 Wall Street analyst thinks Tesla stock is going to $125. Is it a sell?

Tesla is no longer a magnificent stock, according to a Wells Fargo analyst.

Read more »